One key element of the reform - changing the pension benefits of current employees - is railed against by union leaders as being simply and straightforwardly unconstitutional.

“It makes more sense for the General Assembly to reject the governor’s plan and avoid unnecessary litigation," said Michael Crossey, president of the Pennsylvania State Education Association.

Both PSEA and Council 13 of the American Federation of State, County and Municipal Employees have pledged to challenge the measure in court if it's passed.

The Corbett administration has said it's confident its new proposal could win that challenge, but until last week, it never said exactly how.

In a for-credentialed-media-only briefing, Corbett's General Counsel James Schultz explained last week that - in the administration's view - this proposal is unlike all others that have gone before the courts.

The previous attempts to change benefits for current employees that have been declared unconstitutional, he said, all had a retroactive impact.

For example, in 1983 the Legislature passed a law that required employees to contribute an additional 1.25 percent of their salaries into the pension system.

The resulting 1984 Supreme Court opinion, APSCUF v. State System of Higher Education, declared the move unconstitutional because while it freed up money in the General Fund, there was no corresponding benefit to the retirement system. As the court noted, "members are simply required to pay more for each pension dollar they will eventually receive."

At issue is Article 1, Section 17 of the Pennsylvania Constitution, which states: “No ex post facto law, nor any law impairing the obligation of contracts, or making irrevocable any grant of special privileges or immunities, shall be passed.”

Pension benefits have long been determined "deferred compensation" subject to the non-impairment of contracts clause in the Constitution.

But Schultz said the Governor's proposal - unlike all previous cases - is different because it contains no retroactive impairment. It would retain all pension benefits earned to-date.

Employees would receive every pension dollar they have paid for up to this point. Going forward, however, their benefits would be calculated differently, resulting in lower benefits, but only for the period of time served after the law goes into effect.

What's more, the proposal doesn't require employees to contribute more of their salaries into the system as the earlier unconstitutional proposals did; rather, it would lower the multiplier used to compute the amount of benefits paid, and only for the period of time an employee works after the law is passed.

"The Supreme Court has not heard a plan similar to the governor's plan," said Schultz. "There has never been a plan before the court that only affected the prospective benefits - they always had a retroactive component."

Schultz said, "We believe we have a very strong argument and a winning argument."

At PSEA, Crossey countered: “Saying something is constitutional doesn't make it true, regardless of the number of media events the governor's office orchestrates."

That Crossey's point may be something more than partisan bluster can be seen in the fact even the Republican leadership in the Legislature - particularly the lawyers - have viewed Corbett's proposal with one eyebrow arched.

If one reads the concurring opinions in an earlier, 1981 Supreme Court case - McKenna v. State Employees' Retirement Board - one can see why.

Those opinions would seem to make hash of Schultz's argument over prospective versus retrospective changes.

In McKenna, multiple concurring opinions went straight to the origin of the contract in their discussions of impairment.

"The terms and conditions of a retirement contract must necessarily exist at the time the contract is entered into," says one.

Another more explicitly states: "The terms in effect on the date of hire are for all times the terms to which both parties are bound absent a modification by both parties."

Unless the unions sign on to the impairment - which is what happened in Act 120 of 2010 - Corbett's proposal would appear to be a no-go constitutionally.

Again from the concurring opinions in McKenna: "To allow a unilateral change in the terms or conditions of the retirement contract subsequent to its creation, under any circumstances, is contrary to the prohibition against the state's impairment of the obligation of contracts."

And from an even earlier, 1957 case, Wright v. Allegheny County Retirement Board: "The Commonwealth can no more impair its contractual obligation by legislation unilaterally altering the terms of the pension it agreed to give to those in its service than it can by legislation abrogating its duty to pay in full the accrued salary of its employees."

Even then, Schultz suggested there's a way the administration could win.

Citing a U.S. Supreme Court decision, Schultz said an analogous argument could be made before the State Supreme Court that "Even if the court determines an impairment exists, it could consider whether or not it is 'reasonable and necessary for a public purpose.'"

He said of the pension crisis: "This is a very important public purpose."

The state's pension systems currently face an unfunded liability of more than $41 billion, and it's growing; in addition, and in the near-term, the state budget is facing added pension costs of more than half a billion each year for the next three years.

Corbett's Budget Secretary Charles Zogby says if the near-term costs to the budget aren't ameliorated, core government services will have to be cut.

The governor's plan would collar pension payments out of the general fund in the near term, but Zogby says the only way to curb the ballooning unfunded liability - the future cost to taxpayers - is to alter benefits for current employees.

Zogby said he believes legislators want a "once-and-done" solution to the problem, and he said the governor's plan is it.

Schultz added that the changes to benefits for current employees wouldn't be scheduled to take effect until 2015, and he said, "We believe by the time the changes take effect, the court will have ruled."

Politically, passing the pension reform and taking it to court is a win-win for Corbett.

If the court eventually agrees with Schultz's argument and declares the plan constitutional, Corbett will have been the author of an historic reform of public pensions.

But even the worst-case scenario - the Corbett plan fails in court - has a political upside for the governor.

Assuming the court doesn't strike the plan down until 2015 as the controversial provisions are about to take effect, by that time Corbett will have been able to take advantage of two years of the collaring of pension expenses in his proposed budgets.

Corbett came into office facing a $4 billion budget deficit, and two austerity budgets later, his approval ratings are at an historic low. Two more austerity budgets - including cuts to core government functions like police protection - would likely be the nails in his political coffin.

In other words, the pension collars would allow Corbett to go into reelection with budgets that make him appear something more like Santa and much less like Scrooge.

The administration has swatted down as "irresponsible" any suggestion that the collars alone might pass the legislature - because collars alone substantially increase the unfunded liability.

But a worst-case scenario in which the governor's "responsible" plan is passed, only later to have all but the "irresponsible" bits struck down by the court, gives Corbett both the advantage of budget ease during his reelection bid and - eventually - a bunch of black-robed scapegoats.

But there's an even worse worst-case scenario for Corbett: the Legislature taking a pass on his pension plan altogether.

The Republicans in the Legislature could resign him now to perpetual Grinch-dom.

It's no coincidence that Corbett has declared the pension reform his "number one priority."

That doesn't necessarily mean Corbett's plan is just a Machiavellian ploy.

It would reduce the total cost to taxpayers, and as much as Republicans abhor "hope" as a slogan, there is still the chance Schultz's arguments could convince the court.

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